FINANCIAL

MANAGEMENT
TOPIC 1:
INTRODUCTION TO FINANCE

Lecturer: MBA. Nguyen Mai Anh

WHAT IS FINANCE
ROLES OF A FINANCIAL MANAGER
ROLES OF A FINANCIAL MANAGER
1. Making decisions in short-term and long-term investment and financing:
To company grows, increase in sales è require additional investment
• Determine types and quantity of asset
• Best way to fund (loans, equity)

2. Dealing in Financial Market:

• Deal with money market and capital market

3. Making Financial Plans and Forecast:

• Cooperate with other managers è overall company’s strategy plan

4. Control and Coordination:

• Cooperate with other managers è ensure company is operating efficiently
OBJECTIVE OF A FINANCIAL
MANAGEMENT
Making effective decisions è Financial managers need to understand the objectives
that must be achieved in the company
è Financial managers achieves objectives of the company’s owners, which are
shareholders
1. MAXIMIZING PROFIT:

=> short-term objective

OBJECTIVE OF A FINANCIAL
MANAGEMENT
2. MAXIMIZING SHAREHOLDERS’ WEALTH:
Maximize the value of the company’s owners (maximizing the shareholders’ wealth) -
its reflects by the company’s share price in the market
è long-term objective
Ø This objective is more appropriate compared with just maximization of profit:
Ø Say “No” to bad investment decision which falls share price
Ø Say “Yes” to good investment decision which increase share price
AGENCY PROBLEMS

To minimize problems,
company offers incentives
to motivate managers:
- Compensation
- Let managers be the owners
TYPES OF BUSINESS ORGANIZATIONS
TYPES OF BUSINESS ORGANIZATIONS
1. SOLE PRIPRIETORY:
• Number of owners: 1
• Capital resources: owner’s saving,
loans from family members, friends and bank
• Owner liabilities: unlimited liability: owner has to
use own property to pay business’ debt if it fails to pay
TYPES OF BUSINESS ORGANIZATIONS
TYPES OF BUSINESS ORGANIZATIONS
2. PARTNERSHIP:
• Number of owners: 2 or more partners
• 2 types of partnership:
i. General partnership: unlimited liabilities
ii. Limited Liability Company (LLC): one member - unlimited liabilities + others – limited
liabilites and are not involed in managing the business
TYPES OF BUSINESS ORGANIZATIONS
TYPES OF BUSINESS ORGANIZATIONS
3. COMPANY:
• Number of owners: 1 or more – stockholders/ shareholders (can get many
investors by selling stocks/ shares)
• Owner liabilities: limited
TYPES OF BUSINESS ORGANIZATIONS
FINANCIAL MARKET
Financial market is intermediary that connects capital depositors with borrowers
There are 2 main financial market:

Money Market Capital Market

Short-term securities Long-term securities

Low default risk Longer maturity date - Higher risk

Government treasury bill, Bonds,

Commercial note, Preference Shares,
Banker acceptance Ordinary shares